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Good day, and welcome to the Tongdao Liepin Group 2022 Third Quarter Conference Call. Today's conference is being recorded.
At this time, I would like to turn the conference over to Xueni Wang. Please go ahead, ma'am.
Thank you, operator. Hi, everyone. Thank you for joining us on today's conference call to discuss our results for the 9 months ended September 30, 2022. The company's financial and operating results were published and were posted on the company's IR website at ir.liepin.com. On today's call, Mr. Rick Dai, company's Chairman and CEO will kick off with our business operations and highlights. The remarks will be in Chinese followed by English translation. After that, Mr. Tim Tian, our CFO, will continue with detailed financial review. After the prepared remarks, we will be available to answer your questions. Before we continue, I would like to remind you that this call may contain forward-looking statements made under the safe harbor provisions. Such statements are based on management's current expectations and current market and operating conditions and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results, performance or achievements to differ materially from those in the forward-looking statements. Further information regarding these and other risks, uncertainties and factors is included in the company's filing with the Hong Kong [indiscernible]. The company does not undertake any obligation to update any forward-looking statements as a result of new information, future events or otherwise, except as required [ under ] law. Please also note that certain financial measures that we use on this call are expressed on a non-GAAP basis. Our GAAP results and reconciliation of GAAP to non-GAAP measures can be found in our earnings release.
I will now turn the call over to our Chairman and CEO, Rick. Please go ahead, sir.
[Interpreted] Hello everyone. Welcome to Tongdao Liepin Group's Third Quarter 2022 Results Conference Call, and thank you for your continued attention to support to us. During the third quarter of 2022, the overall macroeconomic condition and the recruitment industry was still under considerable pressure. And a full economic recovery still face many challenges. But no matter what environment we are in, we will remain focused on business development and the internal strength enhancement.
In terms of our group's financial performance, for the 9 months ended 30th September 2022, our revenue amounted to RMB 2.013 billion, representing a year-on-year increase of 7.1%. Our non-GAAP profit from operations was RMB 396 million, a 28.7% year-on-year increase. Thanks to the active adjustments of our operating strategies and the in-depth implementation of cost reduction and efficiency enhancement measures, our non-GAAP profit margin reached 19.7%, an increase of 3.3 percentage points compared with the same period last year. Also, our net profit attributable to equity shareholders reached RMB 256 million, up by 100% year-on-year. In the third quarter, the confidence of enterprises and residents were still quite low with macro condition uncertainties and the pandemic situation remaining the primary considerations. Therefore, we saw a limited recovery of recruitment demand and a slow execution of recruitment decisions. In terms of the job market, the urban survey unemployment rate was stabilized during the third quarter, but still at a high level, and the structural imbalance of the job market remains unsolved. From the perspective of talent, they were still cautious about career changes and stability remain their main focus. Due to the overall impact on the recruitment market, our revenue in the third quarter amounted to RMB 641 million, down by 5.9% year-on-year. Specifically, the revenue generated from our business customers dropped by 1.7% year-on-year, credit to our resilient mid- to high-end market positioning. On the other hand, the consumption level of individual users was more sensitive to macro changes and ongoing low willingness to consume dragged down the overall revenue growth in the third quarter. However, we can see that in recent years, the government remain dedicated to accelerating the national industrial transformation and bringing new development opportunities in constructing a new industrial pattern. The development of emerging industries cannot be achieved without healthy support, injection of capital and gathering of talent. The market demand for experienced and highly sophisticated talent will become more noticeable while the demand for our talent service providers who can offer high-quality talented job mentoring will also be more significant. Leveraging our high-quality talent pool accumulated over the past decade, accurate matching algorithms, professional services and broad industrial coverage, our group is more confident than ever in serving China's industrial operating under the strategy of strengthening the nation through human resource development. In terms of our group strategy, since the second quarter, we have made it clear that our business development tactics for this year were demand [ digging ] and targeted expansion, providing us with growth opportunities and long-term potential even in challenging conditions. In the third quarter, we focused more on execution, continue to explore effective action plans and therefore, promoted the tactics more thoroughly within our group. At the same time, we actively optimized our operation strategy to improve user conversion efficiency. Our enhanced operation system can intelligently classify our acquired business leads and efficiently distinguish customer acquisition channels, regions and keywords through analyzing and classifying the data sources. Our system can then automatically suggest various suitable product packages to different customers, empowering our business development through digital sales and marketing capabilities. The combination effects further enhance our sales accuracy and conversion efficiency. Second, our private domain traffic operation strategy continue to mature through the compound effect of utilizing WeCom along with our official mini program and mobile applications, we comprehensively activated our existing users and discovered more business opportunities. Third, for large-scale business customers such as [indiscernible] enterprises, who still have considerable recruitment demand this year, we rapidly accumulated customer service know-how and laid a solid foundation for the future acquisition of such enriched customers. Based on the efficient implementation of these strategies, by the end of third quarter, our registered business users exceeded 1.1 million, up by 15.8%. The number of registered individual users reached 81.6 million, up by 14%, and the number of registered headhunters exceeded 210,000, up by 11.2% year-on-year. We always aim for providing our users with highly efficient user-friendly products, algorithm [ automization ], constant product iterations and more interactions on our platform, while our main focus is, in the third quarter, to ensure the precision and efficiency of our matching results, we always emphasize the authenticity and accuracy of our original data sets. With years of data learning and industrial experience, we introduced an AI system to our users. Our algorithm is able to identify and alert abnormal data inputs and provide intelligent suggestions, further improving matching accuracy and optimizing the user experience. At the same time, directed by our SaaS solution tactics, we continue to enhance the collaboration and process management features of our products. Functions such as [indiscernible] and administrative data dashboards enable multiple recruiters to access dynamic analytical data at any time, allowing them to better streamline their recruitment process and further improve user stickiness. In terms of data security, our information review mechanism and security systems have always been in the industrial leading position and solidified continuously. This year, we further optimized our review and information distribution mechanism, leading to higher reviewing efficiency. Unqualified job postings are always strictly screened and removed in a timely manner, providing our users with a healthy and sustainable environment. With the tireless efforts of our team, we are pleased to share with you that our information recommendation algorithm and information search algorithms have passed the Internet information service algorithm record published by the Cyberspace Administration of China in August and October of this year, respectively, providing a solid base for our compliant, stable and healthy long-term development. Finally, I would like to share with you a major marketing campaign of our group in the fourth quarter. I believe that many of you who follow the World Cup have recently seen many vivid orange images appear. Yes, we are very honored to be the top soccer tournament partner of the China Media Group this year. We have not only captured the primetime prematch advertising before the opening match of the World Cup, but have also secured the exclusive title of the CCTV show, [ Yangshipin Live ], and the forefront show on CCTV 5. We also participated in the World Cup section on TikTok as the industrial sponsorship partner. All of this went online on November 20. As we all know, we have always been more focused on process matching rather than a pure tracking model. So why will we undertake such a vast marketing campaign at this point of time of the year? Here, I would like to share with you several main reasons. First, the employment situation this year has been under pressure, but there actually are still many job openings. The structural mismatch of talent to job has led to an urgent need to recruit suitable talents for certain jobs. So our marketing campaign aims to improve our brand recognition.
With the help of this kind of international event, we are introducing our company as a professional recruitment platform to more job seekers and enterprises in order to facilitate more talent to job matching. We now have 81.6 million registered individual users and 1.1 million registered business users, but our margin has been concentrated on first tier cities, new first-tier cities and certain second-tier cities, such as Beijing, Shanghai, Guangzhou, Shenzhen, Hangzhou and Nanjing.
Our marketing activities has also been mainly concentrated in key areas of these cities. So our rent coverage has not been 100%. There are still many enterprises and individual users who are suited to our platform but remain unaware of us. Therefore, from a brand awareness point of view, we still have very large room for growth. The second one is that World Cup coincided with the end of the year. We see many companies and job seekers preparing for the recovery next year. So we also hope to gather more job postings from enterprises and recruiters to our platform through this publicity opportunity, providing quality jobs and opportunities for job seekers. We are also letting more people know about Liepin, a professional recruitment application that supports online job postings, especially for emerging industries for free to recruit suitable talents.
During the same time, we will fully launch our professional recruitment season activities, mainly the talent greenfields, targeting the 4 major industries of Internet, technology, new energy and big health. We are hosting special online recruitment activities and nearly 100 live streaming recruitment activities to help enterprises and talent interact and match. At the same time, we will also hold online welfare recruitment activities in more than 10 key cities in cooperation with local media to help more talent with their employment.
Finally, from a financial perspective, our group has always had a very healthy cash flow and sufficient capital reserve. After carefully evaluating the impact of the entire campaign on our business operations, the management agree that the current operating conditions are fully positioned to support this onetime marketing campaign. Overall, we will leverage on this marketing campaign to broaden our marketing influence in face of a quite challenging first quarter and the upcoming 2023. Meantime, we will also dive deeper into the online recruitment business by implementing our Platform plus SaaS plus Service strategy.
Through bringing our premium advantages, namely high-quality talent, matching talent to career choices with high efficiency and professional service provision capability, we can explore more long-term opportunities. In the meantime, we will continue to pay attention to our internal operations, fortify our corporate governance and improve our operational efficiency and profit generation capability.
We will always work at the frontline and make every efforts to provide high-quality talent services while endeavoring to promote the stability of national employment, enable digital transformation of enterprises and realize the compliant and healthy development of talent service industry. We always believe that technology makes our service more efficient and service bring technology closer to people. We look forward to sharing the value of our growth with more investors in the future. Now I'll turn the floor to our CFO, Tim, to walk you through our financial performance in the first 9 months of 2022.
Thank you, Rick, and thanks again, everyone, for joining our 3Q 2022 earnings release conference call. Our financial performance continued to show healthy growth in the first 9 months of this year reflecting our resilient business model, [ revenue product mix ] and effective business development tactics. Our total revenue in the first 9 months of 2022 was RMB 2.01 billion, a 7.1% increase from RMB 1.88 billion in the same period of last year.
More specifically, the revenue generated from [ talent acquisition ] services and other HR services was RMB 1.78 billion in the first 9 months of 2022, up by [ 1.5% ] versus last year. The firm execution of our business development tactics for this year provided us with more cross-sell opportunities, leveraged on our diversified product offerings while acquiring high-quality customers at the same time. Our revenue generated from talent development services was RMB [ 229 ] million in the first 9 months of this year, declining by 13.8% versus last year, mainly due to talent lowered willingness to pay for future endeavors under such uncertain macro conditions and the certification test delay in some cities. Our gross profit was RMB 1.58 billion in the first 9 months of 2022, up by 7.9% versus last year. Our gross margin was 78.7%, remaining relatively flat versus the same period of last year. Turning to operating expenses.
Our sales and marketing expenses were RMB 851 million in the first 9 months of 2022, down by 1.8% versus last year. The sales and marketing expense margin decreased from [ 46.1% ] to 42.3% on a year-over-year basis. So our optimization was a reflection of: one, our stringent cost control during the period; second, further improved sales efficiency as well as achieve more effective business development tactics in a timely manner; and third, mature digital operation system, which could support us in user acquisition and a company conversion, hence, enabling us to further optimize marketing channels and promote a more suitable product mix. We continued to invest in R&D to improve our IT infrastructure, optimized our matching algorithm, launched innovative functions and strengthened data security capability during the first 9 months of this year. Our R&D expenses were RMB 282 million, up by 23.4% versus last year. And our R&D expenses margin was 14.0%, up by 1.8 percentage points. Even in such challenging period with all sorts of uncertainties, we continue to develop innovative businesses and solidify our advantages, hence providing more efficient and professional services to our users.
And our G&A expenses were RMB 240 million in the first 9 months of 2022, down by 3.7% versus last year, and our G&A expense margin in the first 9 months of 2022 and 2021 were 11.9% and [indiscernible] respectively. The decreased G&A expense margin was mainly driven by improved efficiency of our corporate governance. As a result, our profit from operations in the first 9 months of 2022 was RMB 303 million, up by 54.0% versus last year. And our net profit for the period was RMB 311 million, up by 85.3% versus last year, and our non-GAAP operating profit, excluding share-based compensation expenses and amortization of intangible assets resulting from acquisition was RMB 396 million, up by 28.7% versus last year. Overall, although sporadical physical restrictions caused by the pandemic imposed ongoing impacts from the macro economy on our business during the third quarter, we still saw encouraging positives in many effects such as new tactic implementation, improving internal system and product upgrades, et cetera. Moreover, our branding campaign during the course of World Cup this November has opened up greater long-term opportunities for us in a broader market. The expenses associated with this marketing campaign will be mainly booked in the fourth quarter of this year and will bring one-off impacts to our P&L as a result.
But with our sufficient cash reserves and long-term healthy cash flow, like Rick just mentioned, now we are fully prepared for and capable of embracing such one-of-a-kind branding opportunity. As overall, as a professional talent service provider, we will always devote ourselves to the stability and development of the national employment market while continuing to deliver sustainable growth and create value for our stakeholders. With that, operator, please open the line for questions.
[Operator Instructions] [ Steven ].
My question is regarding the recruitment market outlook. It's understandable that the COVID resurgence is pressuring the recruitment activities of enterprises. Just wondering how job posting growth is trending on your platform in the quarter to date in terms of year-on-year trend versus last quarter. And what's management's guidance on revenue growth into the fourth quarter? And when should we expect to see the core business back to the normalized level of growth you previously talked about, such as the mid-to-high-teens growth CAGR?
[Interpreted] Under such a particular environment this year, the number of new job postings in the entire recruitment industry have been significantly impacted. This pressure is continuing in the fourth quarter. In October, only a few industries maintained a year-on-year growth in terms of new job postings. Enterprises' confidence and sentiments are still in the process of [ fighting ] it out. So it still takes time for their confidence to be reestablished and reflected in the recovery of recruitment demand in our business.
In view of the number of new job postings among Tier 1 industries, real estate, media and advertisements, Internet and other industries continue to show a downward trend in October, but at a lesser degree compared to the third quarter. Tier 2 industries such as new energy, environmental protection, energy and water solutions, automotive, electronics and semiconductors showed growth to various degrees. And these industries have become our advantageous industries. As we continue to dig deep into the recruitment industries, we are able to seize the opportunity of industrial transformation, thanks to our flexible business development strategy. The recruitment industry and the macro economy are highly correlated, and there is still considerable pressure from the current macroenvironment and the economic control. We expect this condition might last until the first quarter of next year. However, we have been positioned to cover this whole industry since our inception and keep pace with the national industrial upgrade. Our proactive efforts in serving emerging industries in the past 3 years have also helped us to smooth out some of the impacts brought by the industrial rotation.
From the marketing segment point of view, the resilience of mid to higher market is still very noticeable. But in face of the nationwide downturn in economic activity and reduced mobility, we will still actively adjust our strategy at this time to preserve our strength and improve operational capabilities. We'll continuously refine our products and focus on technological upgrades. We look forward to seeing a meaningful economic recovery and a return of enterprises' confidence by the middle of next year.
[Operator Instructions]
[Foreign Language] My first question is as you approach the end of the year and normally enterprises will consider to renew contracts with recruitment platforms, could management share some initial feedback from the clients regarding their recruitment budget and contract renewal for next year? And what's our strategy to gain more wallet share from these customers?
And second is, if we look at first quarter next year, and normally it's a strong seasonality for recruitment market, but of course, we still face high uncertainties from COVID and macro. So with this backdrop, could management share your plan around Chinese New Year regarding user acquisition and marketing and how would that affect our margins in the first quarter?
Thanks, [ Wei ]. I'll take the questions from you. So regarding your first question on the strategy of the customer renewal. So basically, by the end of each year, especially in December, many enterprises will consume the unspent annual recruitment budget at once. So in prior years, our cash income was also the highest during the period of September throughout the year. So we think that a similar trend in this December as well, but the market will be definitely weaker. There is also certain pressure upon our overall contract renewal this year.
So if we look at the industry verticals like real estate, Internet companies, media, consumer [ peers ] and other industries were definitely under significant pressure this year and had a relatively weak recruitment demand. So some of our customers kind of downgraded their contracts with renewal and some delayed the renewal. Although there were quite noticeable upsells among emerging industries, such as new energy, high-end manufacturing and comprehensive health, the downward impact brought by struggling enterprises could not be fully offset due to the current size of the emerging industries. So it is still depend on the overall recovery of the macro economy in this fourth quarter and next year. And starting from this year, we firmly implemented the business development tactics of demand digging and targeted expansion. On one hand, we actively optimized our tactics in customer acquisition and conversion and upsell, while also improving our private domain [ passive ] operation strategy. [indiscernible]. For large customers such as SOEs who still have strong recruitment demands, we enclosed contracting capabilities. And on the other hand, we continue to emphasize on algorithm optimization product information and try to keep strengthening our review mechanism and security systems to provide a healthy environment for our users.
Meantime, leveraging on the World Cup advertisement placement during the fourth quarter, we actually expanded our brand recognition, promoting products and activities as a result. Our sales team and other sales channels like live streaming will play key roles in expanding user coverage and improving the conversion rate, preparing for the recovery next year. The current environment remains quite tough, and we will continue to improve our internal efficiency for sure, try to execute strict cost controls and other ways to gather resources to deep dive into the sections with high potentials, while better positioning ourselves for future market recovery. Regarding your second question on the plan for next spring during the Chinese New Year, I think, as you know, right, the Chinese New Year -- the spring festival will be quite early next year, only about 2 months from now, and the situation still remains cloudy for the moment. And so we will adopt marketing measures and customer acquisition strategies that are of higher certainty. We will also further optimize our marketing channels by reducing our efforts in media of uncertainties such as the offline advertisement that we usually did and shifting more attention to channels with proven effectiveness or higher ROI that we can observe.
Also, our improved digital marketing and sales capability enable us to precisely explore customers' demands and we can improve the sales efficiency and conversion results. What is also worth mentioning here is that our most known branding campaign during the World Cup by the end of this year can also be well connected with next new year's or spring festival's campaign.
The effect of the brand promotion and the customer capture could last till next year or even further. I think, once again, right, we will continue to ensure some cash flow and improvement of the operational efficiency for next year. And we actually believe these efforts will be eventually revealed through our bottom line growth as well. I think that's my feedback to your 2 questions.
[Operator Instructions]
Can you hear me?
Yes.
I have 2 questions. So my first question is, so given the current challenging environment and COVID situation, so how should we think about the 2023 outlook and what will be our strategies next year? And my second question is, so we are seeing some weakness in individual users business. So can management help us to understand the reasons behind and share some color on the coming quarters?
[Interpreted] Enterprises projection and recruitment activities were partly subdued because of the sporadic pandemic during the second half of the year. But our business customers are generally of high quality and their businesses are still relatively stable and resilient. So their recruitment demand transferred to us are also quite robust. Well, of course, it is more difficult to acquire customers and convert them this year.
Besides we are mainly contracted a prepaid revenue model, our revenue is usually deferred and recognized based on customers' consumption over 12 months. So as a result, this year's pressure will be still lingering during the following 1 or 2 quarters. At this point of time, the overall market conditions for next year still remain unclear. It mainly depends on factors like stage of the macro economy and development of the pandemic. So for us, next year, it's still about cost reduction and efficiency improvement while actively, but also cautiously, exploring market opportunities. The result-oriented cross-sell products were preferred in the current recruitment market. And the demand was quite strong, especially among large enterprises and emerging industries. In addition, we see opportunities in serving some government bodies so that we are promoting cooperation with local governments across the country, offering product mix, including campus recruitment and some public welfare activities.
These efforts also contributed to our revenue generation. Overall, we'll continue our tactics of demand digging, targeted expansion and One CV One Strategy. We'll keep observing the market demand and proactively take market share if the segment recovers meaningfully. We'll support our users with higher recruitment efficiency, leveraging on our 3 main advantages: namely high-quality talent; matching talent to create choices efficiently; and capability of providing professional services. And in the long term, we will continue to strengthen our advantages in the mid-to-high recruitment market following the strategy of Platform plus SaaS plus Service, while continuously exploring and building new models that are mutually beneficial to the country ecosystem. Our 2C business mainly consists of online professional certification training businesses and career services for job seekers and it maintained declining in the third quarter. The decline was mainly due to the current sluggish market environment and correspondingly individuals' low willingness and capability to pay for consumption and also the cautiousness in making career changes due to the decrease in job opportunities this year. Stability was still the primary consideration.
And at the same time, many certification tests were canceled in various regions due to the sporadic pandemic condition, adversely impacting the recognition of our 2C revenue financially. Although the steady implementation of policies related to stabilizing employment and promoting employment in China has brought certain positive boost to the market, we still hold that it will be difficult to restore confidence of individual users in a short period of time, given the uncertainty of the external environment and that our 2C business will still face certain uncertainties in the near future.
So in this regard, we actually took measures to mitigate negative impacts of the pandemic, improved our service standards, enriched product spectrum, optimized course material quality and also continue to prepare for the recovery of the employment market. It's also worth mentioning that although the revenue from our 2C business was under pressure, the profitability has improved significantly. And such a lift in profit generating capability mainly resulted from our efficient internal control and cost reduction.
So thanks, everyone. In the interest of time, that concludes our Q&A session. Thank you once again for joining us today. If you have any further questions, please contact us through our IR e-mail, ir@liepin.com. Have a great day. Thank you. Bye-bye.
This concludes today's call. Thank you for your participation. You may now disconnect. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]